New consultation on corporate criminal offence of failure to prevent facilitation of tax evasion

In the wake of the Panama Papers, David Cameron announced on 11 April 2016 that the Government wished to introduce legislation later this year to criminally prosecute companies which fail to prevent their employees facilitating tax evasion. This new offence was consulted on last year and it would appear that the sudden push to have this written into statute is a direct result of the Panama Papers leak.

This further consultation, which is open until 10 July 2016, seeks responses on the draft guidance and legislation relating to the proposed offence. The main difficulty it seeks to overcome is attributing criminal liability on the part of an individual acting on behalf of a corporation, to the corporation itself.

There are three proposed stages to the new offence:

  • Criminal tax evasion by a taxpayer under existing criminal law, for example, cheating the public revenue.
  • Criminal facilitation of this offence by somebody acting on behalf of the corporation, whether by taking steps with a view to, being knowingly concerned in, aiding, abetting, counselling or procuring the tax evasion by the taxpayer.
  • The corporation’s failure to take reasonable steps to prevent those who acted on its behalf from committing the criminal act outlined at stage two.

The company would be liable whether the individual concerned was an employee or a contractor, and it would have no bearing on a potential prosecution whether or not the company benefitted from their actions.

The new offence would apply to a UK company that fails to prevent the criminal facilitation of a UK tax loss, or an overseas tax loss where the jurisdiction concerned has laws in place equivalent to those in the UK. It would also apply to a non-UK company failing to prevent the criminal facilitation of a UK tax loss.

The consultation also includes draft guidance on what might constitute ‘reasonable’ procedures that a company could implement to prevent the facilitation of tax evasion. These include a clearly articulated risk assessment on which procedures are based, a clear pathway for reporting wrongdoing and disciplinary measures for those breaching the company policies.

For more information regarding this consultation and other legislation soon to be introduced around the strict liability offence, please call TaxDesk on 0845 4900 509 and ask for Isobel Clift.